Posts Tagged ‘Demographics’


>

Shrinking Societies: The Other Population Crisis

The earth’s population is growing at an alarming rate, but in some countries the lack of growth is the biggest problem

A Japanese woman’s role in society is to give birth, and “all we can do is ask them to do their best per head,” said Hakuo Yanagisawa, Japan’s former health minister. His remark, as reported by Bloomberg in 2007, drew criticism for being sexist, but it touches on one of Japan’s most pressing issues: its rapidly aging and shrinking population.
Japan is expected to see its population contract by one-fourth to 95.2 million by 2050, according to the Population Reference Bureau, a Washington-based research group, making it the fastest-shrinking country in the world.Former Eastern Bloc nations Ukraine and Georgia came in second and third, respectively, in a ranking of more than 200 countries by Businessweek.com based on the Population Reference Bureau’s 2010 World Population Data Sheet.
These countries defy the global trend—but that doesn’t mean they’ll be spared problems of their own. The world population is expected to expand by 37 percent to 9.5 billion in 2050, according to the report, but growth will not be evenly distributed. Developing countries will grow the most, with the population in Africa expected to double.
Meanwhile, other regions will shrink as the boomer generation ages, people have fewer children, and workers leave for opportunities abroad. The most widespread decline is projected in Eastern Europe, where birthrates have declined since the breakup of the Soviet Union. The number of people in every country in the region, except the Czech Republic, is forecast to contract. By 2050 the region will have lost 13.6 percent of its population, according to data from the Population Reference Bureau.
“Europe, Korea, and Japan have gone into panic mode,” says Carl Haub, a senior demographer at the Population Reference Bureau. A declining population impacts a country’s economic growth, labor market, pensions, taxation, health care, and housing, according to the U.N. Globally by 2050, the number of older persons in the world will exceed the number of young for the first time in history, according to the U.N. The imbalance will create havoc in the pension systems and make it difficult to support retired and elderly persons, Haub says.
Despite these economic and social consequences, there have been no easy long-term solutions for countries trying to reverse this trend. “Demographic changes are pretty glacial,” says Haub.

Incentivizing Growth

That does not mean governments are not trying. Many countries are on a mission to raise the number of births. Although migration patterns affect many countries—such as Lithuania, where the number of people leaving the country is several times the number entering it—they change quickly and can be difficult to project.
Japan’s fertility rate fell from 1.57 children per woman in 1989 to 1.26 in 2005, according to Haub. It has rebounded to 1.4, but remains below the rate needed to replace the population: 2.
To encourage people to have more children, the government started implementing a series of programs called “Angel Plans” in 1994, says Toshiko Kaneda, senior research associate at the Population Reference Bureau. The plan offers counseling to couples, increases child-care services, and provides a monthly stipend of 26,000 yen (approximately $303) per child to ease the burden of raising a family.
In Germany, where the fertility rate is 1.3, the government pledged to increase the number of nursery schools and introduced an allowance that pays 67 percent of a parent’s income for the first year after a child is born if he or she stays home.
Even in Iran, where the fertility rate is 1.8, President Mahmoud Ahmadinejad recently introduced a policy that pays families for every child born and deposits money into the child’s bank account until he or she is 18.
Such policies only have moderate success, says Dimiter Philipov, a research group leader at the Vienna Institute of Demography in the Austrian Academy of Sciences. As subsidies mainly cause people to have children earlier, the number of births typically increases in the first few years after a policy is passed. The allowances are much lower than the amount needed to raise a child, but “this is a success because it brings in more babies and makes population changes smoother,” he says.
Also, while declining fertility was once attributed to the falling marriage rate, today the deteriorating job environment also affects people’s decisions to have children, according to NLI Research Institute in Japan. Thus, in developed countries, rather than offer financial incentives, Philipov says, it is more effective to relieve pressure on parents through child-care services and ensuring job security for mothers. “Some would say no one has done it better than France,” where there is a broad menu of services for women and parents, says Haub.

Ideal Fertility Rate

Some argue the need to boost the fertility rate might not be so urgent. Tomáš Sobotka, a research scientist at the Vienna Institute of Demography, wrote in February in a column for The Guardian in the U.K. that demographers have been envisioning the demise of Europe since birthrates in the region began declining in the late 19th century, but “it is not population size but affluence and technology that make some countries more powerful than others.”
Philipov says a debate has emerged about the ideal fertility rate. Advances in science and technology that boost productivity might compensate for a fertility rate below the replacement level, such as 1.7 to 1.8, he says.
Still, a fertility rate of 1.4 or 1.5, as seen in many countries, is “too low,” Philipov says. At that level, the number of entries into the labor force becomes too narrow, making it difficult to support pensioners and children.

Elder Care

As fewer children are born, the fastest-growing age group in the world is people age 80 and older, according to the U.N. In 2000, there were about 4 people over age 85 for every 100 people ages 50 to 64; by 2050, it will rise to 11.
The situation is more dire in places such as Japan, where the Population Reference Bureau predicts there will only be one working-age person for every person over age 65 in 2050. Already, there are long waiting lists at nursing homes in Japan’s cities. To meet demand, the government has been recruiting, testing, and training nurses from Indonesia and the Philippines.
Also, new technologies are being introduced in Japan to serve the elderly, although they are no substitute for people. For example, companies have reportedly been designing robot caretakers, devices for remote medical care, and cars that monitor brain activity to assist older drivers.
Over the next 40 years, the age pyramid will be upside down and technological advancements will only provide limited relief. While demographic trends are difficult to change, Haub says, “something will have to happen.”
Click here to see the 25 countries with the fastest-shrinking populations.

Wong is a lifestyle and real estate reporter for Bloomberg Businessweek.

Shrinking Societies: The Other Population Crisis – BusinessWeek

Share this|var addthis_config = { ui_cobrand: “The MasterBlog”}

________________________



BEIJING—A 60-mile traffic jam near the Chinese capital could last until mid-September, officials say.

Associated Press

A jammed section of the Beijing-Zhangjiakou highway in Huailai.
Traffic has been snarled along the outskirts of Beijing and is stretching toward the border of Inner Mongolia ever since roadwork on the Beijing-Tibet Highway started Aug. 13. The following week, parts of a major road circling Beijing were closed, further tightening overburdened roadways.
As the jam on the highway, also known as National Highway 110, passed the 10-day mark Tuesday, local authorities dispatched hundreds of police to keep order and to reroute cars and trucks carrying
After days of road rage, drivers in China can finally breathe a sigh of relief. Video courtesy of Fox News.
essential supplies, such as food or flammables, around the main bottleneck. There, vehicles were inching along little more than a third of a mile a day. Zhang Minghai, director of Zhangjiakou city’s Traffic Management Bureau general office, said in a telephone interview he didn’t expect the situation to return to normal until around Sept. 17 when road construction is scheduled to be finished and traffic lanes will open up.

Editors’ Deep Dive: Challenges to China’s Transport Infrastructure

Access thousands of business sources not available on the free web. Learn More
Villagers along Highway 110 took advantage of the jam, selling drivers packets of instant noodles from roadside stands and, when traffic was at a standstill, moving between trucks and cars to hawk their wares.
Truck drivers, when they weren’t complaining about the vendors overcharging for the food, kept busy playing card games. Their trucks, for the most part, are basic, blue-colored vehicles with no features added to help pamper drivers through long hauls.
Truck driver Long Jie said his usual trip from the coal boomtown of Baotou in Inner Mongolia to Beijing, which normally takes three days, was now taking him a week or more. The delay, he said, meant he would have to raise his rates above the usual 12,000 yuan, about $1,765, for a 30-ton truck full of cargo.
[CTRAFFIC.map]

Sounding frazzled and tired, Mr. Long, a driver for Baotou Zengcai Shipping Co., said in a telephone interview that the traffic got a little better once he finally made it off the highway.
Though triggered by construction, the root cause for the congestion is chronic overcrowding on key national arteries. Automobile sales in China whizzed past the U.S. for the first time last year, as Chinese bought 13.6 million vehicles, compared with 9.4 million vehicles in 2008. China is racing to build new roads to ease the congestion, but that very construction is making traffic problems worse—at least temporarily.
China’s roads suffer from extra wear and tear from illegally overloaded trucks, especially along key coal routes. Coal supplies move from Mongolia through the outskirts of the capital on their way to factories. There are few rail lines to handle the extra load. Though the current massive gridlock is unusual, thousands of trucks line up along the main thoroughfares into Beijing even on the best days.
Beijing is particularly prone to traffic jams because it is a bottleneck point. Drivers from the northwest have to navigate its rings of concentric circular highways to get to coastal ports or to head south. The sixth-ring road is the biggest, and until a new beltway is finished in the next few years, there is no alternative route around the capital.
Also entering the mix is the swell of passenger cars into the city from residents who have had to move farther from the capital to find affordable homes.
Other cities around the world face similar congestion headaches. The worst are in developing countries where the sudden rise of a car-buying middle class outpaces highway construction—unlike in the U.S., which had decades to develop transportation infrastructure to keep up with auto buyers.
A recent study by IBM suggested some of the worst commutes are in Moscow, where drivers reported 2½-hour delays, on average, when asked about the worst traffic jam they faced in three years. Still, Beijing beat out Mexico City, Johannesburg, Moscow and New Delhi to take top spot in the International Business Machines Corp. survey of “commuter pain,” which is based on a measure of the economic and emotional toll of commuting.
The mega-jam on the city outskirts comes as officials warn that downtown traffic in Beijing is steadily worsening. State media on Tuesday reported that average driving speeds in the capital could drop below nine miles an hour if residents keep buying at current rates of 2,000 new cars a day.
At that pace, Beijing will have seven million vehicles by 2015, according to the head of the Beijing Transportation Research Center, and transportation will slow to what it was decades ago when China was known as the Bicycle Kingdom.
Beijing’s roads now have capacity to handle 6.7 million vehicles—and that is assuming current restrictions stay in place, such as the one requiring private cars to keep off the road for one day a week. Still, Beijing has half the number of cars of a comparably sized city, such as Tokyo.
The capital greatly expanded its bus lines and subway in preparation for the 2008 Summer Olympics, and work continues to open even more stations. But public transport remains crowded and many who can afford it prefer to drive cars.
Longer term, city planners are pinning their hopes on expanded mass transit, adding subway, light rail and mode dedicated bus lanes.

—Gao Sen and Sue Feng contributed to this article.

Copyright 2009 Dow Jones & Company, Inc. All Rights Reserved
This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit

www.djreprints.com
China Traffic Jam Could Last Into September – WSJ.com

_______________________________________




A refugee bombshell
By ZVI MAZEL
23/07/2010
Proposal to grant rights to Palestinian refugees in Lebanon would violate unanimous Arab consensus that they must return to Palestine.
Walid Jumblatt, the Lebanese Druse leader who crossed the lines a year ago and left the pro- Western coalition to join the Syrian camp, has thrown another bombshell into the political arena. The aim is further exacerbating tensions and conflicts within Lebanese society. On June 19 he stunned the political community by submitting to parliament four bills which, if adopted, would grant Palestinian refugees a number of rights – not including citizenship.

They would be given the right to own a place of residence outside refugee camps, to be free to gain employment in whatever field they chose and to enjoy attendant social benefits such as health insurance and retirement plans.

The move was sure to heighten hostilities between Christians and Muslims and it did not fail. All Christian political parties – including that of Michel Aoun, the Christian general who joined the opposition led by Hizbullah – opposed the proposals and managed to send them to various parliamentary committees for further consideration. As to the Muslim parties, Hizbullah included, their reaction was muted and they let it be known they were open to discussion.

At the core of the problem is the fear shared by all that granting rights to Palestinian refugees would not only ultimately lead to their settling in Lebanon for good – thus destroying the fragile equilibrium between all communities – but also violate the unanimous Arab consensus against settling refugees in host countries, since they must return to Palestine.

According to UNRWA there are 425,000 Palestinian refugees – a number which includes those who fled in 1948 and their descendants – living in 12 camps scattered all over Lebanon. The number is probably inflated, since many managed to move to other Arab countries or to the West to find suitable employment.

FOLLOWING THE 1969 Cairo Agreement between the Lebanese government and the PLO and other understandings reached over the years between the Lebanese government and the PLO/Fatah under Yasser Arafat, the refugees must live in the camps, where they enjoy administrative autonomy, are allowed to have weapons and to “train toward the liberation of Palestine.” Lebanese security forces do not enter the camps but are posted around them.

Created in 1949, UNRWA sees to the welfare of the denizens of the camps, provides education and health services as well as food; however its budget is steadily shrinking. Buildings have replaced tents, but the refugees cannot leave to find work or buy a home outside, and the camps have turned into slums whose inhabitants are exploited by a number of Palestinian organizations with their own agendas. Fatah rules most of the camps, but Hamas, the Popular Front for the Liberation of Palestine and all the other groups are there; more recently jihadist organizations loosely affiliated with al- Qaida have also moved in. Quarrels often turn violent and can degenerate into gunfights.

It is from some of the camps that jihadist organizations planned their operations before going outside to fire rockets into Israel.

Lebanese authorities are forbidden to enter the camps and they can only watch helplessly. But in 2007 extremist elements in the Al-Barad camp near Tripoli, doing Syria’s bidding, planned a series of terror operations in northern Lebanon to further destabilize the country. Syria wanted to pressure the Lebanese government into stopping the operation of the international court of justice it had set up with the UN Security Council to investigate the assassination of former prime minister Rafik Hariri. Damascus is the prime suspect.

There ensued three months of bloody fighting between the extremists and the Lebanese army, leaving 400 dead, including 168 soldiers. The camp was totally destroyed and tens of thousands of refugees were left homeless.

Pro-Syrian Palestinian factions, such as Ahmed Jibril’s PFLP-General Command, also set up fortified positions outside the camps, mainly in the eastern part of the Bekaa Valley along the Syrian border. The Syrians are using these positions, where the Lebanese army dares not enter, to stockpile ammunition and to train Jibril’s militants, who bear arms openly, to carry out subversive operations against Lebanon.

The overall picture is bleak, but no one in Lebanon or in the Arab world will acknowledge the fact that this situation is the result of the deliberate Arab policy not to settle the refugees in neighboring Arab states to preclude any attempt at putting an end to the conflict born of the Arab refusal to accept the partition plan which would have provided for a Palestinian state. It was the concerted attempt of Arab states to destroy the newly born State of Israel that created the plight of the Palestinian refugees.

MORE THAN 60 years later, Lebanon is the main victim of this impossible state of affairs that threatens its very existence.

Putting the refugees into camps was supposed to be a temporary solution. Successive Lebanese governments repeated that the refugees would ultimately go back to Palestine and refused to let them settle in the country. This was set in the constitution and included in the Taif agreement of 1989 that ended the Lebanese civil war.

The agreement also stipulated that all militias outside the camps – Hizbullah and Jibril’s organization included – would be stripped of their weapons. It did not happen. No Lebanese government was able to enforce that part of the agreement.

Poverty, terror and lack of hope have turned the camps not only into a festering sore in the heart of the country, but also a powder keg which could explode at any time, throwing Lebanon into chaos and threatening to splinter into a myriad of warring units.

All parties understand that this can’t go on much longer and that “something” has to be done. So far Lebanon is clinging to the so-called Saudi/Arab initiative which reiterated that the refugees would not be settled in their host countries – an empty statement by all accounts.

Now Jumblatt has dropped his bombshell, knowing full well that his country alone cannot solve the problem, and that even discussing it will only deepen the chasm between the communities and weaken the government.

The committee for legal affairs to which the proposals were submitted first postponed the debate, then scheduled it for July 15. The refugees, however, are restless and they held a mass demonstration in Beirut demanding civil rights “to be able to live decently.” Hamas chairman Khaled Mashaal told Palestinian students in Damascus that Palestinians must be given full civil rights, while adding that this by no means meant that the refugees would be settled in Lebanon, since the Palestinians would never give up their right of return.

UNRWA chairman Filippo Grandi, who was in the Lebanese capital at the end of June, also called on the Lebanese government to grant civil rights to the refugees, claiming that creating a stable Palestinian society was in the interest of Lebanon.

The purpose of his visit had been to collect funds to rebuild the Al-Barad camp, which had been destroyed in the fighting.




In a press conference he said that he had only been able to raise half of the $450 million needed. In other words, in spite of all the problems the UN is willing to rebuild the camp, thus perpetuating the refugee status of the Palestinians.

Christian political parties are standing firm in their opposition. Aoun declared at a recent congress of his party that he will never agree to a measure which would let Palestinians buy real estate in his country.

It is worth mentioning no human rights organization has seen fit to comment on the plight of the Palestinian refugees in Lebanon. Arab countries feel bad about a situation which is of their making, and choose not to interfere.

The end of June also saw a meeting of the Lebanese-Palestinian dialogue committee in Beirut. Palestinian Authority President Mahmoud Abbas sent a delegation headed by Azzam al-Ahmed, a member of the Fatah central committee, which was joined by representatives of the PLO in Lebanon. The delegation met with Lebanese President Michel Suleiman and Prime Minister Saad Hariri as well as with Christian party representatives Amin Gemayel and Aoun. They had the same message for all: Palestinian refugees would remain guests in Lebanon according to the laws of the country and would not abandon their right of return – but they demanded civil rights to enable them to live decently.

All were waiting to see what the prime minister would have to say when he rose to speak at the meeting. They were disappointed: There was nothing new in his speech. Hariri repeated that though the Lebanese government was responsible for the Palestinians living in Lebanon, the international community must assume its share and ensure that they are given their right to return to Palestine.

He added that the government and the parliament would do what they have to do, but the world must do the same.

The Lebanese prime minister has no miracle solution and is in deep trouble.

Granting refugees the right to buy real estate throughout the country and to work in whichever profession they choose would be a blow to young Lebanese who are trying to buy a home and find a job. It would also be a first step toward settling in Lebanon for good. The Christian parties are opposed to such a move and the Muslim parties are not keen either: They know only too well that it would only deepen Christian antagonism and could lead to a renewed civil war. Tearing the country apart is just what the Syrians want because it would leave Lebanon weak and helpless.

Nobody knows how to deal with Jumblatt’s bombshell or how to defuse it. For the present, the Lebanese will deal with it in the traditional way – by doing nothing and hoping that the camps do not blow up in their face.

The writer is a former ambassador to Egypt and Sweden.

A refugee bombshell

________________________
The MasterBlog




Lebanon: Palestinian refugees can work 
By GIL HOFFMAN AND AP

18/08/2010

Danny Ayalon hopes move is first step toward citizenship.



The Lebanese parliament voted on Tuesday to grant the country’s 400,000 Palestinian refugees the right to work in the same professions as other foreigners, lifting a decades-old ban that had relegated the refugees to the most menial jobs.

The bill was intended to transform Lebanese policies toward the refugees, although Palestinian leaders in Lebanon and human rights workers say it was only a first step that leaves significant stumbling blocks in place.

RELATED:
Opinion: A refugee bombshell
Palestinian refugees protest for rights in Beirut

The Palestinians living in Lebanon are isolated from the rest of the country in refugee camps to a higher degree than anywhere else in the Arab world.

“I was born in Lebanon and I have never known Palestine,” said Ahmed al- Mehdawi, 45, a taxi driver who lives in the Ein el- Hilweh refugee camp, which is notorious for its lawlessness.

“What we want is to live like Lebanese. We are human beings and we need civil rights.”

Ein el-Hilweh, the largest camp in Lebanon with about 70,000 inhabitants, is located on the outskirts of Sidon.

Deputy Foreign Minister Danny Ayalon (Israel Beiteinu) praised the Lebanese parliament’s decision and expressed hope that Lebanon and other Arab states would give the Palestinians living in their countries full rights.

There was no reason for them to be considered refugees after 62 years, he said.

“This is only a small step that is long overdue on the way to completely naturalizing them in Lebanon and in other places around the world that host Palestinians,” Ayalon said. “History shows that displaced people eventually get adopted where they live.”

Ayalon wrote an article that was published in The Wall Street Journal’s American, European and Asian editions on July 29 in which he highlighted the poor treatment of Palestinians in Lebanon at a time when a Lebanese flotilla was said to be bound for the Gaza Strip.

“Today, there are more than 400,000 Palestinians in Lebanon who are deprived of their most basic rights,” Ayalon wrote. “The Lebanese government has a list of tens of professions that a Palestinian is forbidden from being engaged in, including professions such as medicine, law and engineering. Palestinians are forbidden from owning property and need a special permit to leave their towns. Unlike all other foreign nationals in Lebanon, they are denied access to the health-care system.”

Ayalon said he could not assess whether his article and the international pressure on Lebanon it caused had a significant impact on the parliament’s decision, but he said that “even if the impact was marginal, I am satisfied.”

According to UN figures, around 4.7 million Palestinians claiming to be refugees – who fled or were driven from their homes during the 1948-9 and 1967 wars – and their descendants are scattered across the Middle East. They live mostly in the West Bank, the Gaza Strip, Lebanon, Jordan and Syria.

Palestinian negotiators have demanded at least partial repatriation, but Israel has refused, saying an influx of refugees would dilute its Jewish majority and threaten the existence of the state.

Unlike in neighboring Syria and Jordan, where Palestinians enjoy more rights, the refugees in Lebanon live mostly on UN handouts and payments from the rival Palestinian factions. Those who do work are generally either employed by the UN agency UNRWA or as laborers at menial jobs such as construction.

Parliament on Tuesday lifted the restrictions that kept Palestinians almost entirely out of the formal labor market, although they are still subject to the same regulations as other foreign workers.

Lebanon’s National News agency said the lawmakers amended a segment of the labor law that dates back to 1946.

But the laws governing foreign workers in Lebanon pose a unique problem for Palestinians, who are stateless.

Lebanese law restricts some professions only to Lebanese, while many other professions – such as law, medicine and engineering – require the employees to be members of the relevant professional association.

But most of these associations say foreign membership depends on reciprocity in their home country – which effectively bars Palestinians, who don’t have one.

“If you’re a Palestinian born and raised in Lebanon and your dream is to become a doctor, you’re out of luck,” said Nadim Houry, the Beirut director at Human Rights Watch.



Houry said Tuesday’s vote was a welcome step, but more needed to be done.

Ali Hamdan, an aide to the speaker of Lebanon’s parliament, Nabih Berri, said Tuesday’s vote would legalize much of the work that many Palestinians already were doing and open up positions in fields such as insurance and banking.

“For the first time, Lebanon, which is a small country, is trying to solve a historic crisis for the Palestinian refugees,” Hamdan said.

Lebanon: Palestinian refugees can work

The MasterFeeds


CAIXIN ONLINE
Aug. 3, 2010, 8:30 p.m. EDT

Fear empty flats in China’s property bubble

Commentary: Even worse than price bubble is quantity bubble of vacant flats

By Andy Xie
BEIJING (Caixin Online) — How many flats in China are sitting empty? The media recently floated a story — denied by power companies — that 64.5 million urban electricity meters registered zero consumption over a recent, six-month period. That led to a theory that China has enough empty apartments to house 200 million people.
Statistical transparency is lacking in this area, so the truth about empty apartments remains under wraps. Publishing accurate data should be of the highest priority, since the size of the nation’s unused apartment stock is perhaps the most important measure of the extent and seriousness of China’s property-market bubble. Indeed, it’s a grave concern for policy making, since unpublished data may indicate not only a price bubble but a quantity bubble burdening the market.
ABOUT CAIXIN
Caixin is a Beijing-based media group dedicated to providing high-quality and authoritative financial and business news and information through periodicals, online and TV/video programs.
Get the Caixin e-newsletter
Real estate is prone to price bubbles because unique factors restrict its supply response. Inflated prices have been the mark of most modern-day property bubbles. Price bubbles occur frequently and can last a long time.
In the 1980s, Tokyo saw a tremendous rise in property prices not in tandem with supply. The Hong Kong property market experienced a similar phenomenon in the 1990s.
One reason for limited supply is that property development is subject to government regulations, especially local rules. Established communities usually restrict building heights and density, for example, making it virtually impossible for mature communities to increase supply quickly. London, which is now experiencing a price bubble, and Tokyo in the past are cities that tightly control building heights.
Second, infrastructure development takes time and is always relative to land availability. Even in an island-city such as Singapore, land can be reclaimed from the sea at low costs, pointing to the correlation between land and infrastructure. But when property prices are high, and even when money is available for infrastructure development, one should be cautious about plunging in for fear that property prices could later fall. Thus, even over extended periods of time, property supplies may not respond to price increases.
Hong Kong doesn’t have height restrictions like London or Tokyo. Nor does it have infrastructure or land shortages. But a government policy limiting land supply created scarcity before 1997, setting the stage for a bubble. The subsequent catalysts for higher prices were loose monetary conditions imported from the United States through Hong Kong’s currency peg to the dollar. Even though prices were rising, the government chose not to increase supply, leading to a price bubble.
Thus, demand for property also rises under eased monetary conditions, and climbing price momentum attracts speculative demand. If monetary conditions remain loose for a while, credit access can sustain this kind of speculative demand. This points to a need for the Chinese government to adjust its property-market policies as well as interest rates to reduce speculation and steer the market out of a looming bubble crisis.
It’s been said many times that China is experiencing a nationwide urban property price bubble. High prices in major cities where most of the country’s property value is concentrated cannot be explained rationally.
Rising rents are a little easier to explain, however, even in the face of empty flats everywhere. Some blame intermediaries for ramping up the market, but this explanation is hard to stick in China’s fragmented intermediary real-estate industry. Instead, inflation expectation is probably driving current rent increases: Property owners anticipate spending more in the future remodeling flats to compensate for renter wear-and-tear, so they charge higher rents now to plan for higher costs.

Quantity pump

What especially distinguishes China’s property bubble, however, is an unprecedented amount of living space. This huge stock of empty flats equals the nation’s quantity bubble.
Quantity bubbles are less common than price bubbles, and they don’t last as long. Rising supply usually exerts downward pressure on prices, although an influx of money can hold up prices even when supply is rising.
A price bubble can damage an economy in three ways. First, it usually leads to a banking crisis. As the market trades at ever-higher prices, buyers borrow more against the same property. Banks that maintain the same lending cushion with, say, a 30% down-payment rule suffer losses when prices fall below that level. A banking system in crisis cannot lend normally, and the economy suffers collateral damage due to dysfunctional banking.
Second, the wealth effect leads to excessive consumption during a bubble. The payback weakens an economy for several years.
And third, bubble-induced demand distorts the supply side. When inflated industries go down with a bubble burst, it takes time for other industries to rise in an economy in their place.
A quantity bubble is sometimes a construction bubble, and it fizzles out when a building cycle turns over, crashing prices as soon as new supply becomes available. This is what happened to a commercial property bubble in the United States in the late 1980s, triggering a bank crisis when it burst and prompting the Federal Reserve to maintain a loose monetary policy that helped the banking system heal.
Quantity and price bubbles may grow together. Southeast Asia, for example, experienced a quantity-cum-price bubble that lasted several years in the 1990s. As regional currencies were pegged to the dollar, loose monetary conditions were imported from the United States, fueling a property bubble. Due to few restrictions on urban development, rising prices led to massive increases in supply. Liquidity inflow fueled speculative demand. But when U.S. monetary policy tightened, the market crashed and triggered the Asian Financial Crisis.
The latest experience in the U.S. market was mainly based on a price bubble, although some cities such as Las Vegas and Miami saw quantity bubbles as well. The U.S. government quickly recapitalized its banking system, limiting the direct effect of the banking crisis on the economy. Current weakness can be explained mainly by the wealth effect and employment losses in bubble-inflated industries.
When Taiwan experienced a price-cum-quantity bubble in the late 1980s, analysts determined the number of empty flats by obtaining electricity meter data from the power supplier, leading many to conclude that about 15% of all flats were empty. Today, some analysts are trying the same tactic in China. But Taiwan’s housing conditions are less complex. Getting to the core of China’s data requires more calculating.
Housing types, for example, must be considered. China’s urban housing stock is mainly split between old, public housing built for company or government employees, and some 60 million units of private housing built over the past 10 years. Property developers are now building about 20 million private flats, and local government-owned land banks may be good for another 20 million to 30 million.
About 1 billion square meters worth of public housing (or about 14 million, 70-square-meter units) have been torn down, leaving about 9 billion square meters of this type of living space nationwide.
Moreover, companies and government agencies are still building apartments for employees. This practice has slowed but remains significant in many cities even today. It’s hard to tell how many of these newer flats are out there.
There are similar unknowns about dormitories, such as factory dormitories that house workers from rural areas who migrate to manufacturing regions. Most of China’s more than 200 million migrant workers may be living in such dormitories.
Not all commercial property is market-driven, since certain people with connections or other advantages may own rental apartments that tend to have high vacancy rates and should be taken into account when calculating market excess.
Another consideration is that massive quantities of housing have been springing up in rural communities near major cities. And when farmland is rezoned for urban development, the region’s housing starts falling into the urban category.

Numbers crunching

Although China’s new property sales topped 14% of GDP in 2009, the data is confusing. Maybe it’s confusing by design, since firm figures on total urban housing stock are hard to find. My guesstimate is that China’s total urban stock is around 17 billion square meters, plus or minus 10%.
One useful figure for analysts is China’s living space per capita. Surveys in most cities suggest the average living space is between 28 and 30 square meters per person. We don’t know which population segment these surveys cover; they certainly don’t include migrant workers. And we don’t know if empty flats are counted.
Based on this limited data, however, we can confidently conclude that China does not have a housing shortage. Moreover, its per-capita living space is higher than in Europe and Japan. Indeed, if we adopt Japan’s standard, China already has sufficient urban housing space for every man, woman and child in the country.
Far more important than general data, however, are the housing figures pointing to a huge quantity of empty flats apparently being held only for speculation.
In a normal market, the vacancy rate should be equal to the number of households relocating, times the average transition period, plus newly formed households times the average purchase period. For example, a vacancy rate of 1.5% could accommodate a market in which 6% of households relocate every year, and the transit time is three months. If new household formation is 3%, and the average period for a property purchase is six months, this factor requires a vacancy rate of another 1.5%. The total normal vacancy rate should be 3%. This figure includes the new properties ready for sale.
Although the government doesn’t publish vacancy data, I think the vacancy rate for the nation’s private, commercial housing stock is between 25% and 30%. That’s at least double what’s required in a normal market. The gap between what’s needed and what’s available can be viewed as speculative inventory. The value of this inventory held by speculators is probably around 15% of GDP. It’s being kept on ice, just as copper and other commodities are hoarded in anticipation of rising prices.

Watch out

We should fear China’s quantity bubble. And we should be terrified by the potential for a massive amount of new, speculative inventory that could come on line this year and next.
Right now, tight credit is holding back the market, and supply is piling up on the developer side as inventory. The government’s tightening squeezed buyers of second and third homes, and transaction volumes across the country collapsed. What I’ve learned from intermediaries is that most property demand now falls into restricted categories, i.e., speculative.
It’s reasonable to assume, therefore, that the supply would be close to 15% of GDP in value this year and in 2011. That’s because when the policy is relaxed — as most expect — speculation will probably revive and lead to a doubling in the total value of speculative inventory.
Chances are good that policy makers will indeed relax policy. In some cities, banks are already loosening a bit. A key reason is that local governments have a lot of debt — commonly five times more debt than revenue — and could get into financial trouble without a decent level of property transactions.
Local governments in China depend on real-estate deals for revenue and could default if the market falls too far. Thus, the central government may loosen policy to help the locals without making a formal announcement. Such a change of heart would ease short-term government difficulties but double the trouble down the road when the property bubble bursts.
So even if China’s stock of empty flats is only half that recent estimate of 64.5 million, it would still be equivalent to 20% of all urban households. That’s higher than Taiwan’s vacancy rate at the peak of its bubble. Moreover, as credit rules are loosened, the stock could rise to more than 30%.
China’s housing oversupply isn’t surprising. Excess supply reflects the under-pricing of capital, and China’s system is structured to increase supply quickly. But rising prices alongside rising vacancy rates are surprising. Normally, speculators are spooked by high vacancy rates. But China’s phenomenon is unique for at least four reasons:
1) A sustained negative real interest rate has led to a falling demand for money and rising appetite for speculation. Greed and inflation fears are working together to form unprecedented speculative demand for property.
2) A massive amount of gray income is seeking safe haven. China’s gray income of various sorts could be around 10% of GDP. In an environment of rising inflation with a depreciating dollar — the traditional safe haven — China’s rising property market is becoming a preferred place to park this money.
3) Few people in China have experienced a property bubble. The property crash in the 1990s touched a small segment of society, such as foreigners and state-owned enterprises. Geographically, it was restricted to the country’s freewheeling zones in Hainan, Guangdong and Shanghai. Most people didn’t even know there was a property crash. This ignorance has led to a lack of fear that’s now turbo-charging greed.
4) Speculators think the government won’t let property prices fall. They correctly surmise that local governments rely on property deals for money and do all they can to prop up prices. But their faith in government omnipotence is misplaced. At the end of the day, the market is bigger than the government. The government can delay, but not abolish, market forces. Nevertheless, faith in government is replacing fears of a downside, and speculative demand will continue to grow as long as credit is available.
In other parts of the world, central bank attitudes toward real-estate speculation are changing. Israel’s central bank just raised its interest rate, specifically citing a need to fight a property bubble. Property prices in Israel have risen 20% in the past 12 months. India, Korea and Taiwan are raising interest rates out of concern for inflation and speculation as well.
China’s problems are much bigger than what’s found in these economies. But keeping interest rates low will only worsen the nation’s bubble problem. Periodic credit tightening and crackdowns on speculation won’t work because they are not taken seriously and never last.
China’s latest property-market tightening appears to have been improvised. Of course, any buyer discrimination policy is complex, hard to implement and creates excessive market volatility. Now, if special-interest pressure leads to a change in policy, speculators would be further emboldened, and the excess would multiply, making the eventual adjustment so much more painful.
Raising interest rates, however, would cool speculative demand gradually, avoiding market disruptions. At this point, a rate hike would be the best policy option. But a delay in raising interest rates would only cause a surge for the stock of empty flats and inevitably lead to collapse.
Long range, a policy of sustainability would require resolving local government financial problems by increasing non-property revenue sources or limiting expenditures. Currently, the investment-led growth strategy that’s been adopted by all local governments inevitably leads to maximizing revenues from land sales. So unless limits are put on this strategy, the property market will function abnormally.
Property taxes could play a significant role in revenue streams. In many countries, property taxes support local governments and public services. China should adopt the same model, while also restricting fiscal spending.
The bottom line is that China urgently needs a coherent property strategy. The massive overhang of empty flats should goad policy makers to act now. If the government eases rules for the property market before adopting a coherent policy, though, a crash could bring down the economy for an extended period.
One only needs to glance at modern-day price and quantity property bubbles around the world to understand the stark consequences. What’s happening to the U.S. economy now is a prime example, and it should be lesson for us. Otherwise, China’s economy will look like America’s. See this commentary on Caixin Online.


The Roman philosopher Seneca may have put it best 2,000 years ago: “To be everywhere is to be nowhere.” Today, the Internet grants us easy access to unprecedented amounts of information. But a growing body of scientific evidence suggests that the Net, with its constant distractions and interruptions, is also turning us into scattered and superficial thinkers.
The picture emerging from the research is deeply troubling, at least to anyone who values the depth, rather than just the velocity, of human thought. People who read text studded with links, the studies show, comprehend less than those who read traditional linear text. People who watch busy multimedia presentations remember less than those who take in information in a more sedate and focused manner. People who are continually distracted by emails, alerts and other messages understand less than those who are able to concentrate. And people who juggle many tasks are less creative and less productive than those who do one thing at a time.
The common thread in these disabilities is the division of attention. The richness of our thoughts, our memories and even our personalities hinges on our ability to focus the mind and sustain concentration. Only when we pay deep attention to a new piece of information are we able to associate it “meaningfully and systematically with knowledge already well established in memory,” writes the Nobel Prize-winning neuroscientist Eric Kandel. Such associations are essential to mastering complex concepts.
When we’re constantly distracted and interrupted, as we tend to be online, our brains are unable to forge the strong and expansive neural connections that give depth and distinctiveness to our thinking. We become mere signal-processing units, quickly shepherding disjointed bits of information into and then out of short-term memory.
In an article published in Science last year, Patricia Greenfield, a leading developmental psychologist, reviewed dozens of studies on how different media technologies influence our cognitive abilities. Some of the studies indicated that certain computer tasks, like playing video games, can enhance “visual literacy skills,” increasing the speed at which people can shift their focus among icons and other images on screens. Other studies, however, found that such rapid shifts in focus, even if performed adeptly, result in less rigorous and “more automatic” thinking.
In one experiment conducted at Cornell University, for example, half a class of students was allowed to use Internet-connected laptops during a lecture, while the other had to keep their computers shut. Those who browsed the Web performed much worse on a subsequent test of how well they retained the lecture’s content. While it’s hardly surprising that Web surfing would distract students, it should be a note of caution to schools that are wiring their classrooms in hopes of improving learning.
Ms. Greenfield concluded that “every medium develops some cognitive skills at the expense of others.” Our growing use of screen-based media, she said, has strengthened visual-spatial intelligence, which can improve the ability to do jobs that involve keeping track of lots of simultaneous signals, like air traffic control. But that has been accompanied by “new weaknesses in higher-order cognitive processes,” including “abstract vocabulary, mindfulness, reflection, inductive problem solving, critical thinking, and imagination.” We’re becoming, in a word, shallower.
In another experiment, recently conducted at Stanford University’s Communication Between Humans and Interactive Media Lab, a team of researchers gave various cognitive tests to 49 people who do a lot of media multitasking and 52 people who multitask much less frequently. The heavy multitaskers performed poorly on all the tests. They were more easily distracted, had less control over their attention, and were much less able to distinguish important information from trivia.
The researchers were surprised by the results. They had expected that the intensive multitaskers would have gained some unique mental advantages from all their on-screen juggling. But that wasn’t the case. In fact, the heavy multitaskers weren’t even good at multitasking. They were considerably less adept at switching between tasks than the more infrequent multitaskers. “Everything distracts them,” observed Clifford Nass, the professor who heads the Stanford lab.

It would be one thing if the ill effects went away as soon as we turned off our computers and cellphones. But they don’t. The cellular structure of the human brain, scientists have discovered, adapts readily to the tools we use, including those for finding, storing and sharing information. By changing our habits of mind, each new technology strengthens certain neural pathways and weakens others. The cellular alterations continue to shape the way we think even when we’re not using the technology.

The pioneering neuroscientist Michael Merzenich believes our brains are being “massively remodeled” by our ever-intensifying use of the Web and related media. In the 1970s and 1980s, Mr. Merzenich, now a professor emeritus at the University of California in San Francisco, conducted a famous series of experiments on primate brains that revealed how extensively and quickly neural circuits change in response to experience. When, for example, Mr. Merzenich rearranged the nerves in a monkey’s hand, the nerve cells in the animal’s sensory cortex quickly reorganized themselves to create a new “mental map” of the hand. In a conversation late last year, he said that he was profoundly worried about the cognitive consequences of the constant distractions and interruptions the Internet bombards us with. The long-term effect on the quality of our intellectual lives, he said, could be “deadly.”

What we seem to be sacrificing in all our surfing and searching is our capacity to engage in the quieter, attentive modes of thought that underpin contemplation, reflection and introspection. The Web never encourages us to slow down. It keeps us in a state of perpetual mental locomotion.

It is revealing, and distressing, to compare the cognitive effects of the Internet with those of an earlier information technology, the printed book. Whereas the Internet scatters our attention, the book focuses it. Unlike the screen, the page promotes contemplativeness.
Reading a long sequence of pages helps us develop a rare kind of mental discipline. The innate bias of the human brain, after all, is to be distracted. Our predisposition is to be aware of as much of what’s going on around us as possible. Our fast-paced, reflexive shifts in focus were once crucial to our survival. They reduced the odds that a predator would take us by surprise or that we’d overlook a nearby source of food.

To read a book is to practice an unnatural process of thought. It requires us to place ourselves at what T. S. Eliot, in his poem “Four Quartets,” called “the still point of the turning world.” We have to forge or strengthen the neural links needed to counter our instinctive distractedness, thereby gaining greater control over our attention and our mind.
It is this control, this mental discipline, that we are at risk of losing as we spend ever more time scanning and skimming online. If the slow progression of words across printed pages damped our craving to be inundated by mental stimulation, the Internet indulges it. It returns us to our native state of distractedness, while presenting us with far more distractions than our ancestors ever had to contend with.

—Nicholas Carr is the author, most recently, of “The Shallows: What the Internet Is Doing to Our Brains.”Printed in The Wall Street Journal, page W1

Copyright 2009 Dow Jones & Company, Inc. All Rights Reserved
This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit

www.djreprints.com





%d bloggers like this: